Correlation Between Deep Yellow and Aura Energy
Can any of the company-specific risk be diversified away by investing in both Deep Yellow and Aura Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Deep Yellow and Aura Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deep Yellow and Aura Energy Limited, you can compare the effects of market volatilities on Deep Yellow and Aura Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Deep Yellow with a short position of Aura Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deep Yellow and Aura Energy.
Diversification Opportunities for Deep Yellow and Aura Energy
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Deep and Aura is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Deep Yellow and Aura Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aura Energy Limited and Deep Yellow is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Deep Yellow are associated (or correlated) with Aura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aura Energy Limited has no effect on the direction of Deep Yellow i.e., Deep Yellow and Aura Energy go up and down completely randomly.
Pair Corralation between Deep Yellow and Aura Energy
Assuming the 90 days horizon Deep Yellow is expected to generate 4.35 times less return on investment than Aura Energy. But when comparing it to its historical volatility, Deep Yellow is 2.96 times less risky than Aura Energy. It trades about 0.02 of its potential returns per unit of risk. Aura Energy Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 22.00 in Aura Energy Limited on August 25, 2024 and sell it today you would lose (11.00) from holding Aura Energy Limited or give up 50.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Deep Yellow vs. Aura Energy Limited
Performance |
| Timeline |
| Deep Yellow |
| Aura Energy Limited |
Deep Yellow and Aura Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deep Yellow and Aura Energy
The main advantage of trading using opposite Deep Yellow and Aura Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deep Yellow position performs unexpectedly, Aura Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Aura Energy will offset losses from the drop in Aura Energy's long position.| Deep Yellow vs. Isoenergy | Deep Yellow vs. Paladin Energy | Deep Yellow vs. F3 Uranium Corp | Deep Yellow vs. enCore Energy Corp |
| Aura Energy vs. Isoenergy | Aura Energy vs. Paladin Energy | Aura Energy vs. F3 Uranium Corp | Aura Energy vs. enCore Energy Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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